Posted
by
CmdrTaco
on Tuesday July 26, 2005 @12:00PM
from the that's-a-lotta-license dept.

An anonymous reader writes "Microsoft's deals with major PC vendors lock users out from alternative options, such as Linux. A recent whitepaper calculates that the cost to industry of this Microsoft monopoly is $10 billion per year."

RTFWP. They figured out what it costs Australia, and they have numbers from Microsoft saying that Australia is 2% of MS's income.

They extrapolate, based on their figure of $200 million in savings, which is 2% of $10 billion.

In reality, in any given year, Microsoft makes $40 billion. Does it really seem ridiculous that 10 of that might be from their monopoly? It seems sensible to me. The WP points out that in buying a computer, that it used to be (ala early - mid 90s) that the hardware was about 85% of the cost, and the software 15%. Now, hardware costs have plummeted, whereas software prices have gone up. Now when you buy a computer, about 65% of the price is hardware, and 35% is software. Good points, if you ask me.

Took a good five minutes to load, but here's the summary folks. Also, keep checking this mirror [mirrordot.org], I'm sure it will be up soon.

Over the past decade, the personal computer industry has seen a major reduction in competition in the operating system platform market. A computer operating system platform is the software which computer users learn to operate their computer with, the software that independent software vendors develop applications for and the software that third-party computer hardware developers create compliant hardware for.

Competition in the desktop computer operating system space is practically non-existent, with one platform from a single supplier commanding a very high proportion (over 95%) of the Australian market. This single platform from a sole vendor is Microsoft Windows. Cybersource believes that a sizeable portion of this market share is due to the fact that over many years, most consumers were never given the option to acquire alternative operating system platforms. Instead, Microsoft Windows was always bundled with most vendors' computer products, whether consumers wanted that bundled product on not.

We have seen that the Australian Competition & Consumer Commission (ACCC) has acted in the best interests of consumers to increase competition in such areas as telecommunications. Cybersource wants to see similar actions introduced in the computer operating system platform space.

In the software market, as in the telecommunications market, a single, powerful and well-leveraged vendor can cause the reduction of real competition and the corralling of almost all consumers into a single monopolistic platform situation. This causes significant reduction in choice, price competitiveness and innovation. Cybersource calls upon the ACCC to rectify this situation for the benefit of the local Information Technology industry and of all Australian IT consumers.

Key Points

1. It is impossible or extremely difficult for consumers to purchase a desktop PC or laptop from a tier-1 or tier-2 computer manufacturer without also having to purchase an OEM copy of Microsoft Windows operating system platform.

2. Cybersource believes that this greatly reduces choice for consumers and competition for the industry. Such a reduction in choice, and consequent reduction in competition, costs the Australian economy hundreds of millions of dollars annually, through paying one vendor needlessly high prices for monopolistic products.

3. The computer market is many ways similar to the telecommunications market. When one vendor has over 95% of the market, that vendor should be bound by a universal service obligation to ensure that all consumers can access the content, documents and data which reside on that vendor's platform. Neglecting such an obligation hinders all consumers and third-party developers not using that vendor's platform, further increasing anti-competitive pressures.

4. Cybersource believes that such anti-competitive practices should be stopped as soon as possible, through remedies introduced by the ACCC, to secure both a broader competitive base and increased options for consumers.

5. The first remedy that Cybersource seeks from the ACCC is that all tier-1 and tier-2 vendors should be required to offer their desktop and laptop products without an operating system pre-installed, that this choice be presented to consumers as broadly as the products themselves are, and that the price difference between the with and without operating system options should also be clearly and broadly presented at retail outlets, on vendor marketing literature and vendor websites.

6. The second remedy that Cybersource seeks from the ACCC is that Microsoft should be required to offer unfettered and unencumbered access to all major content, document, data and applications formats which could enable interchange and interoperability between users of its platform and users of other alternative platforms.

The corporate world uses the crap out of Win2k. It's still supported, it runs just about everything current, save IE 7, and it runs one just about any commodity pc made in the past 7-8 years. That's really where the money is.

HP pulls the same crap. If you look at their otherwise very nice dual Opterona machines, they have one version with WinXP Pro that is $3499. The closest Linux version, with the HP Linux installer kit is $3799. Note that these machines do not come with Linux pre-installe,d they come with the HP 'linux installer kit' so it doesn't cost HP any more to produce these machines. In addition, these machines are specifically targeted at the Workstation market, not the Office PC market, so Linux would be a natural fit in this market. But some mysterious force prevents HP from selling the equivalent machine at a lower price with no OS. It is pretty darn obvious that the DOJ should have required that Microsoft's OEM agreements should always allow distributors to sell machines without Windows discounted by the cost of Windows. Instead, after a successful anti-trust prosecution, we get the same old slimy, probably illegal tactics that we have always seen from Microsoft. Thanks, W!

Actually, it's not as insidious as you might think. Notice that the Dell with XP also has a bunch of other software, like AOL, Wordperfect, etc..

AOL actually pays Dell a fee to include their software, as do the other companies that Dell provides "trial" software for (JASC and others, for instance). This allows them to sell the PC at a lower cost.

Also note that the regular price for the PC is $349, and the $299 price is a special.

I just don't feel they've taken the "good" parts of Microsoft's monopoly into account (kill me for saying that.) Considering all of the features included with the OS that we used to pay for-- Browser, media, utils, etc, Microsoft has "given" a lot to maintain their monopoly. While I support competition whole heartedly (and look forward to a day where I can "choose Mac OS to run on my custom intel hardware) I don't think this is an honest assesment. You get a LOT with what you pay for, and there hasn't even been a new version in 4 years. And they still support you with security fixes for FREE (all jokes aside).

1) You used to pay for browsers and media tools? Since when? Quicktime pro is something you pay for but the basic quicktime has ALWAYS been free, and versions existed back in Windows 3.1. Netscape was free unless you were a business, and frankly the only people who paid were large businesses who cared. As for utils, I really can't think of much that was truly useful. The only useful utilities, ever, I could remember are both for Mac, Norton (which was good until OS X made it obsolete) and Techtool pro (which has a great interface for testing hardware and not just software, which is more useful).

2) Giving away things for free is BAD BAD BAD under a monopoly! It's been posted so many times that slashdotters who read microsoft articles should be able to recite the sherman anti-trust act and the subsequent laws by heart by now! Christ!

When a monopoly gives away something, they are trying to use their huge power and cash reserves to force the competition out of the market. Netscape is the key example. Netscape was trying to make money by making companies buy their web browser while giving it away for free to personal users. Well, microsoft undercut that and gave IE away for free. They used their considerable power in the OS to make a free product and undercut someone who could have legally competed with their own product. That's wrong, and that's illegal under US law.

Now, Media player doesn't count here, because Quicktime and realplayer (if you can count real as competition) already give their media viewers away for free, so there's nothing to undercut.

Office is no more expensive now than when Word Perfect was still alive and kicking.. And the features keep coming. (Though I gladly use openOffice, myself.)

Bullshit, it's feature bloat, no reasonably good features have been introduced since Office 95 except to tighten down the security on their buggy visual macros, and Office costs around $500. My parents bought me the Apple II version of wordperfect for $50, and when I worked at a hospital installing software, business licenses were $20 an install (though there may be other contract fees but when you have to manage 7000 PCs I doubt the fees came out to a $500 a piece price tag, that's what volume discounts are for).

I think the worry should be "Let's not make this a total monopoly so one company can't hold all the keys to human technology in the future" rather than, man, they're screwing us out of cash.. because I think the sheer volume of units they ship actually causes the price to be CHEAPER, not more expensive.

You need economics 101. Monopolies do not follow standard supply and demand theories that competitive markets do. This is because they have total control of the market. They set the price to maximize their profit based on what they can get away with, not based on demand of their product.

However, in conclusion basic sentiment is, that as many figures are these days, they are overblown, and I would tend to agree with you. However I completely disagree that Microsoft has "provided value" to offset any additional costs of "goodness." Besides these figures are overblown anyway, you are coming at the whole thing from the wrong angle.

Wrong!!! Its simple - Dells contract with Mircosoft is set so that Dell pays by the number machines made not the number of copies of WinXP installed. So when you get the Machine that comes with FreeDOS you still get the privlidge of paying for XP - so to keep profits up Dell must charge extra for the computer that comes with FreeDOS. This is a sweet deal for both Microsoft and Dell - Dell gets to cut the price of XP machines and Microsoft gets to lock in lots and lots of computers to XP at shipment. The only person taking it in the pants is some end users and nobody is talking to them.

I do have to agree that Microsoft dominates the PC industry with a lot of unfair partnerships and agreements with PC vendors. But to say that PC consumers are losing billions because of this "monopoly" is a little far fetched. This assumes that PC users actually WANT Linux, and are not being offered the choice.

Lets put it this way. In a fair world, both Linux AND Windows are offered on every Dell computer. Many assume that Linux is FREE and Windows is NOT. Would the Linux option actually cost nothing compared to buying a Windows license on a Dell computer? My honest opinion is NO! While you are able to get Linux for free by downloading it online, a company like Dell would prefer to setup some form of Linux support option which you will have to pay for. Linux IS FREE, Linux support IS NOT! Also, considering the sheer amount of support required by newbies to simply install and use Linux, Dell would quickly want to absorb the extra cost of support by charging SOMETHING for installing Linux on their PC's.

The bottom line is, people often over estimate how free Linux really is. In a perfect world, if Linux was as easy to use and configure as Windows, then yes, you are losing $100 every time you buy a Dell computer because they charge you for the XP license and don't offer you a viable free alternative. But in reality, Dell would charge about $100 to install Linux on their PC's because of all the extra headaches and nightmares it would cause them in technical support alone.

same thing as how Dell has 'a choice' to only offer crappy Intel processors instead of the much superior AMD 64 bit-based machines.

We have been pricing a number of machines in house from Dell, made the mistake of buying one laptop from Dell, but every other machine that we purchase will be from acer or another PC manufacturer that can:

1) beat Dell's prices2) offers AMD machines & much better machine specs all around3) offers WinXP instead of the crippleware XP Home edition (which we reformat anyways and put dual/triple boot OS configurations on them, but at least we get a 'real' copy of XP).

The only reason we have any windows machines in-house is that we are a software developer and customers use XP, whether we like it or not.

I still fail to see how creating exclusivity agreements is a bad thing.

Exclusivity agreements remove choices, and thus harm consumers. In most cases, that is not a big problem as consumers just go with a different competitor. It is a problem when a monopoly is involved. In that case it is not only bad for the consumer, but can be used to keep things bad for the consumer and the free market cannot solve the problem. For this reason it is also illegal.

Except (and I mentioned this in another post but its an important point) for the economy of scale. 99% of computers Dell sells has windows so they have the process streamlined. Add in a freeDos computer and it incurrs extra work over and above that needed to produce the windows PC. So while the cost to duplicate software is nearly free, the cost to build and track an extra SKU that is only purchased by a small number of people is not free and so we have the extra price for the special order. It seems that Dell values this extra work at somewhere around $20.

Riiight. There is nothing saying you can't run commerical proprietary code on Linux...I do it all the time even now using WINE, and it's perfectly legit under the GPL.

The only time you've got to give away code you made is when you've released a product that extends somethign that is already available under the GPL, which is perfectly fair. Its a derivative work, and the only reason you could create it is because someone else put the original work out there for you to build on. Seems fair enough.

Yeah they can choose to go out of business or stay in business. That is exactly their choice as having their prices go up $50 for every machine would make them no longer competitive in the only factor that people buy Dells for, low price. Dells are junk machines, built cheaply, with inconsistent hardware. Dell would lose the number one spot within a year if they started selling Linux desktops at a fair price and were punished by MS for doing so with higher OEM Windows prices. It has happened before and no one at Dell is stupid enough to gamble the whole company on pissing off the only supplier they have for a critical component of nearly every product they sell

Still, it could end up costing Dell a bit of money just supporting the hardware without a commercial operating system. If someone calls to say that their modem is defective, it would require someone who actually has a clue to answer the call and be sure that's what is wrong before sending out the prepaid shipping label boxes and things...